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The energy crisis threatens to break European unity, the head of the IEA warns

by SuperiorInvest

The head of the International Energy Agency has warned European countries of a scramble for energy security this winter that threatens to fracture EU unity and spark social unrest.

Fatih Birol, the IEA’s executive director, said he feared a “Wild West scenario” if European countries cut their own trade or stop cooperating with neighbors due to growing fears of fuel shortages this winter.

“The consequences will be very bad for energy, very bad for the economy, but extremely bad politically,” Birol said Thursday in an interview at the inaugural Global Clean Energy Action Forum in Pittsburgh. “If Europe fails this energy test, it may go beyond the energy consequences.”

European countries have become more volatile as they struggle to maintain a united front amid soaring energy prices that have brought the continent to the brink of economic recession. However, the growing crisis has raised concerns that some countries may cancel side agreements on Russian supplies or limit electricity exports to their neighbors.

There were “two scenarios,” said Birol, who is based in Paris watchdog agency it is financed mainly by OECD members. “The EU and its members will work in solidarity and support each other. . . or there’s another scenario where it’s every man for himself.”

“One of the basic values ​​of the EU is solidarity. It will negatively affect the weight of the EU in the whole world,” Birol said of the second scenario.

Norway’s Nordic neighbors killed Oslo last month for “selfish” behavior when it considered suspending electricity exports while water reservoirs were being refilled.

Andreas Bjelland Eriksen, the state secretary of Norway’s Ministry of Petroleum and Energy, denied that he would stop exports, but told the Financial Times that the country simply “prioritises filling the reservoirs for the same reason that Europe fills its gas (reservoirs)”.

The EU faced opposition from Hungary and some other member states when it deepened sanctions against Russia in response to its invasion of Ukraine.

Birol also warned against European complacency after the continent managed to build up natural gas reserves ahead of the winter months when demand peaks.

Even if the continent avoids new “negative surprises” in gas supplies, such as a colder-than-expected winter, Europe would suffer “bruises” in the coming months, Birol said, including an economic recession and “significant damage to household budgets.”

The crisis for Europe will also last well into 2023, he said, given stagnant global supplies and the likelihood of increased competition for liquefied natural gas from a recovering China and other importers.

“Looking around, there’s not a lot of new gas [projects] is coming . . And the pipelines of Norway, Algeria and Azerbaijan are approaching their maximum capacity. It will be another challenging period,” he said.

But Birol was also adamant that Moscow has “already lost the energy battle” with Europe as the continent looks for alternative suppliers.

Most of Russia’s gas and oil exports went to Europe before the war, he said – but that is now over.

“Russia has lost a good client, forever. This client paid the money on time and did not cause any political problems,” said Birol.

The head of the IEA rejected Russian efforts to replace the European gas market with exports to Asia. “You don’t sell onions in the market.” You have to build pipelines, infrastructure, logistics. It will take at least 10 years,” he said.

Russia would also seek to maintain production because sanctions have limited its access to Western technology and capital, which it needed to continue repairing aging oil fields and gas fields, Birol said.

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